The non-life insurance industry is struggling in talks to divide contributions for the Bad Bank (New Leap Fund), a debt relief program for long-term borrowers in arrears. In the non-life sector, Seoul Guarantee Insurance Company, which holds the majority of the claims subject to the New Leap Fund, is said to oppose a method that allocates contributions based on claim size.
According to the non-life industry on the 24th, the General Insurance Association of Korea is discussing with the five major non-life insurers (Samsung Fire & Marine, DB Insurance, Hyundai Marine & Fire Insurance, KB Insurance, and Meritz Fire & Marine), and Seoul Guarantee Insurance Company how to divide contributions to the New Leap Fund. Most non-life insurers are said to have agreed to allocate contributions based on the amount of claims in arrears subject to the New Leap Fund that they hold.
Seoul Guarantee Insurance Company is reportedly expressing dissatisfaction that dividing contributions by claim size would require it to shoulder almost the entire amount. The industry estimates that Seoul Guarantee Insurance Company holds about 90% of all claims subject to the New Leap Fund within the non-life sector. According to Korea Asset Management Corporation (KAMCO), the combined amount of claims from life insurers and non-life insurers subject to the New Leap Fund is about 640 billion won.
The New Leap Fund is a program jointly promoted by the Financial Services Commission and KAMCO to help long-term borrowers in arrears get back on their feet. It purchases unsecured claims in arrears of seven years or more and 50 million won or less held by financial institutions at about 5% of face value, then extinguishes them or adjusts the debt.
The New Leap Fund totals 840 billion won, funded by 400 billion won in government finances and 440 billion won in financial sector contributions. Banks are expected to cover about 360 billion won, life insurers and non-life insurers 20 billion won each, specialized credit finance companies 30 billion won, and savings banks 10 billion won. Since Seoul Guarantee Insurance Company holds 90% of the non-life sector's claims subject to the New Leap Fund, basing it on claim size would mean paying 18 billion won (20 billion won × 90%).
Seoul Guarantee Insurance Company is the only company in Korea engaged exclusively in guarantee insurance. It sells guarantee insurance across various sectors, including mobile phone installment guarantees and jeonse loan guarantees. Guarantee insurance is a type of non-life insurance in which the insurer compensates the insured, who is the creditor, if the policyholder, who is the debtor, causes a loss through default. Because Seoul Guarantee Insurance Company repays the debtor's debt on their behalf and then recovers over a set period, it inevitably holds a large volume of claims.
Loan products typically supplied by non-life insurers other than Seoul Guarantee Insurance Company allow policy loans of up to 95% of surrender value. If interest remains unpaid for a long period and the loan principal and interest exceed the surrender value, the policy can be terminated early, making the likelihood of long-term arrears relatively low. For this reason, the size of claims subject to the New Leap Fund held by non-life insurers other than Seoul Guarantee Insurance Company is also known to be small.
A Seoul Guarantee Insurance Company official said, "We are expressing the view that the share should be set at a reasonable level. Some sectors have been assessed based on their capacity to contribute, and we believe this should also be taken into account."